Dispute Management SystemWhat's the Best Option for Your Business? Here's How to Get Started.

A 3-Step Process to Building Out a Dispute Management System

So, let’s get this point clear right up front: there is no “one-size-fits-all” solution to dispute management.

Transaction dispute management is a delicate process. A small business catering to a limited niche has needs that are going to be very different from a mega-retailer with millions of customers. Also, deploying the wrong software or processes means wasting considerable resources. In some cases, it may even make you more vulnerable to chargebacks than before.

So, how do you find the right dispute management system for your situation? We’ll give you all the key questions you need to answer here. But first, let’s make sure we’re on the same page about what constitutes dispute management.

What is a Dispute Management System?

I get that the definition is a little vague. So, maybe the best way to think about this is to explain everything that a DMS should feature, and what it should help you do.

A DMS should feature tight integrations with existing systems, such as customer relationship management (CRM) tools and payment processing systems. This way, it can retrieve data about transaction and customer information for use during representment.

A DMS should also be capable of producing useful and relevant reporting on dispute patterns, chargeback root causes, and products or services most prone to disputes. These chargeback reports can help you track your performance in representment, evaluate the effectiveness of your chargeback management strategy, and benchmark your chargeback ratios against historical data.

Learn more about chargeback management

What Can a Dispute Management System Offer?

Chargebacks can be incredibly expensive if left unchecked. First, you lose your revenue, along with any merchandise you’ve already shipped. On top of that, you get slammed with added fees, higher overhead, and threats to your business sustainability. As if that weren’t bad enough on its own, research suggests most chargebacks are either deliberate or accidental cases of friendly fraud.

It’s possible to manage disputes on your own. However, this gets more difficult and unmanageable as the number of chargebacks filed every month gets bigger. This is where a good dispute management system comes in handy.

A well-suited DMS will save you both time and money when compared to running your chargeback management through manual, in-house processes. Having the right software, tools, and tactics in place can help you:

• Allocate staff and other resources more effectively
• Gain better insights through more accurate reporting
• Identify and address developing threats
• See long-term chargeback reduction

Service providers offer different methods of addressing these two needs. For instance, some providers only offer alerts, which are meant to intercept disputes and allow you to issue a refund before the bank issues a chargeback. Other platforms offer fully-managed options, covering the chargeback process from end to end. Still, others lie somewhere in between, offering a combination of self-managed and fully-managed options for different components.

Which Dispute Management System Works Best?

There’s no single answer to this question. At the end of the day, the challenge is to determine which service — or combination of services — will best fit your unique needs.

A SaaS (or “software as a service”) approach to the dispute management process is one option that merchants are exploring. Here, you license dispute management software on a subscription basis, then use that software to facilitate chargeback self-management. In contrast, a fully-managed solution lets you outsource your chargeback operations to a third party who will be accountable to you.

There are benefits to each approach.

You can also take a hybrid approach, adopting complementary components of a fully-managed and SaaS strategy. Some merchants choose to use software that automatically reviews chargebacks, then outsources the representment process to a third party.

It really boils down to two questions: would you rather keep dispute management operations in-house or outsource to a professional? Which functions should be allocated to which channel?

How to Build a Working Dispute Management System

Generally speaking, we can trace all disputes back to one of three fundamental sources:

AI-enabled source detection tools can help you demystify chargeback sources and pinpoint the exact cause of your disputes. After you segment disputes by their source, you can then tackle dispute management as part of a three-pronged strategy:

The Right Dispute Management System for Your Unique Needs

Ultimately, the right dispute management system for you is the one that’s best adapted to your unique needs. For instance, if you only have a small handful of chargebacks every month, you should be able to get by with an entirely SaaS-based approach. If you see hundreds of disputes monthly, though, a full-service option would be the most efficient and effective way to maximize your return.

Other important questions to ask as you develop a dispute management system include:

• Is decisioning rules-based? Any automated process you employ should be based on dynamic, and responsively-structured rules.
• Is it scalable? Your tools and strategies need to grow with you. It’s ineffective to constantly redesign your processes every few months.
• Is it software agnostic? Your dispute management system should be compatible with your other technologies.
• Does it offer relevant reporting? Accountability demands detailed, relevant reporting. It has to tell you what’s working and what needs adjustment.

Take Dispute Management to the Next Level

Remember that the points outlined above are parts of an exhaustive list. There are dozens of potential data points to gauge the overall effectiveness of your systems. In the end, you have to optimize your dispute management system according to what you’re trying to get out of it.

Of course, all these determinations ultimately boil down to one fundamental question: are you satisfied with your return on investment?

Chargebacks911® offered the industry’s first end-to-end dispute management system. Ten years later, we’re still delivering unparalleled results for our customers. From tactical dispute representment to risk assessment and dispute inquiries, we offer a multilayer strategy that’s customizable to your needs and available at a variety of service levels.